Financial Planning When Dealing with Dementia
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By Maggie Overfelt,
CNBC
October 7, 2013

While it isn't an easy subject to discuss, people impacted by Alzheimer's and other forms of dementia need to have candid conversations with financial professionals about the problems the afflictions can bring to a family's finances.

Alzheimer's is one of the nation's deadliest and costliest diseases. The most common form of dementia, the disease afflicts more than 5 million Americans. With no cure in sight, the number is rapidly rising in tandem with aging baby boomers and is expected to triple by 2050, according to Alzheimer's Disease International. 

What's more, the disease's financial strain is $200 billion a year in the U.S. alone. It's expected to pass $1 trillion by 2050 in medical and nursing home expenditures.

That is why it is important for advisors to also understand how Alzheimer's can take a toll on families affected by the disease and know how to design and implement financial strategies to protect a client's interests.

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Its signature mark—memory loss—is distressing. However, it also impedes one's ability to make financial decisions, making it pertinent for at-risk investors to lay out health care and financial plans long before the disease takes its toll. 

"Family members are already on emotional overload—adding a financial and legal decision aspect to what they're already going through is enormous," said Carol Steinberg, president of Alzheimer's Foundation of America, a national nonprofit focused on the care and needs of people with the disease. "Therefore, the more decisions made earlier on and with the input of the loved one, the easier it is." 

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Financial planning, of course, can help. Financial experts urge families affected by Alzheimer's to complete a will. That means a living will and durable powers of attorney for health care and finance.

They also stress discussing insurance options for the financial consequences of the disease. That should include long-term-care insurance, annuities and life insurance with riders that provide a benefit if chronic care is needed. 

While it makes sense for individuals with a history of dementia in their family to have more of a reason to line things up while the person still has full cognitive ability, these basic steps (wills and insurance options) are things most people should already have in place, financial experts say. 

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"Fifty percent of people who come to us don't have their wills done," said Holly Kylen, a retirement coach and an independent financial advisor with ING Financial Partners. 

Along with a will, advisors urge investors to review all estate planning documents (like a living trust) and name a durable power of attorney, the person who will make financial decisions when the person with Alzheimer's no longer can handle making those decisions.

"In many respects, financial planning should take place before a disease is diagnosed," Steinberg said. "No one has a crystal ball, but it's good to be prepared for whatever chronic disease may be in your future." 

Many financial advisors recommend appointing a close family member—usually a spouse—as a power of attorney. It should be someone whose relationship with the person with Alzheimer's has a trusted relationship.

But in the fraught case of dealing with the end-of-life decisions brought about by Alzheimer's, some experts say a family is better off to appoint a third-party who doesn't have an emotional attachment to the investor—or his or her assets. \

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"I've (seen) parents who don't trust their kids at all," said Christopher Dukes, a certified financial planner and chief executive officer of Dukes Wealth Management. "That's when I'll tell them to consider someone they're not related and to whom they're not leaving any money." 

There's likely a cost associated with working with an outsider, but it's worth the investment because in some cases family arguments and lawsuits can destroy an estate, Dukes said. 

While some investors may already be using an estate planning attorney to draft a will or a living trust, financial experts believe it makes sense to work with someone well versed in elder care law.

For instance, an elder care attorney, working in tandem with a financial advisor, can help older individuals who are looking to purchase long-term care insurance. They can also help with health-care directives and creating living wills.

Financial advisors also stress that families affected by Alzheimer's need to keep the lines of communication open.

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When the condition of a client diagnosed with Alzheimer's began to worsen, Shomari Hearn, vice president of Palisades Hudson Financial Group, asked the client's wife (who was the power of attorney) to sit in on their meetings so she could become familiar with the decisions she would one day have to make.

Hearn also documented and summarized the conversations to make sure the spouse had important information handy after her husband no longer had the capacity to make the financial decisions.

Most people want to talk about these issues, advisors admit. But because so many people with Alzheimer's cannot communicate in the last few years of their life, it is vital and makes sense to create a good planning strategy to have those types of conversations up front, financial experts say.

This piece originally appeared at CNBC.com:

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